KARACHI: The State Bank of Pakistan (SBP) has allowed prospective declarants of foreign assets to discharge their tax liability under Foreign Assets (Declaration and Repatriation) Act 2018 from locally held foreign currency accounts.
The prospective declarants who can also make such payments from their immediate family members maintaining foreign currency accounts with banks in Pakistan could only discharge the tax liability out of balances maintained as of March 31, 2018 or June 20, 2018, whichever is less.
The SBP, through a notification issued on Thursday, has brought in a number of additions/amendments in its earlier notification dated April 16, 2018.
Whereas declarants having bank accounts outside the country but presently residing in Pakistan can also pay the tax in US dollars by depositing the US dollar denominated cheques with the authorised branches of NBP in Pakistan for collecting the proceeds for onward credit to SBP account in NBP New York.
The National Bank of Pakistan has been advised by the SBP to make special arrangements for expeditious collection of cheque proceeds which may take 7-10 days in collection of the proceeds.
However, the SBP has cautioned that the declarants using this payment option should be aware of possible delays in collection of the proceeds. The SBP will only issue the CPR (challan payment receipt) on realisation of funds in its account.
These changes have been made on the demand of Pakistan Tax Bar Association (PTBA) and trade bodies that recently held two meetings with Minister for Finance, Revenue and Economic Affairs, Dr Shamshad Akhtar in Islamabad.
The tax amnesty scheme is part of the Tax Reforms Package announced by the then Prime Minister Khaqan Abbasi on April 6, 2018. Later a Presidential Ordinance was issued which became an act after the National Assembly passed it on June 5, 2018.
However, a delegation of PTBA led by President Abdul Qadir Memon, members from Federation of Pakistan Chambers of Commerce and Industry (PFCCI) and Pakistan Stock Exchange took up issues related to the tax amnesty scheme with the Finance Minister on June 18 and 20.
Tax experts and trade bodies expressed their concern over a short period given for availing the tax amnesty scheme which comes to an end on June 30, 2018.
The SBP also issued FAQs (frequently asked questions) with regard to the procedure for repatriation of liquid assets and deposit of Tax under Foreign Assets (Declaration and Repatriation) Act, 2018.
It clarified that tax payment cannot be made through exchange companies, money business services, etc. The tax payment can only be made through banking channels either from the declarants’ own accounts or from the accounts of the declarants’ immediate family members such as parents, children, spouse, and siblings (brothers and sisters).
In case of payment through the immediate family member’s accounts, the taxpayer while sending the copies of PSID, Form ‘A’ etc, to SBP for generation of CPR, will also send satisfactory documentary evidence to establish the relationship.
The balance in FCY deposits as of March 31, 2018 or June 20, 2018 whichever is less can be used for the purpose of tax payment. For instance if the balance in an FCY account is $10,000 and $5,000, respectively on March 31, 2018 and June 20, 2018, the tax payment to the extent of $5,000 can be made from this account.
The SBP’s FAQs further clarified “although it is highly desirable to remit funds through wire transfer from the banks where the declarants or their immediate family members are maintaining the bank accounts, the declarants having bank accounts outside Pakistan but presently residing in Pakistan can also pay the tax in US dollars by depositing the dollar cheques with the authorised branches of NBP in Pakistan for collecting the proceeds for the SBP account in NBP New York. Declarants have been advised to be mindful that payment abroad could result in delays due to processing or time difference, as well as additional charges from the banks involved, which could result in the funds received by the SBP being less than the amount that was remitted.